Truck maker Volvo profit beats forecast, but chip woes linger

2:52 am Thursday, October 21st, 2021

By Helena Soderpalm

STOCKHOLM (Reuters) -Sweden’s AB Volvo beat third-quarter core earnings expectations on Thursday, boosted by strong demand for its trucks even as lingering chip shortages hampered production.

Shortages of components and freight capacity had resulted in production disruptions and increased costs, Volvo said in a statement.

It also cautioned it expected further disruptions and stoppages, both in truck production and in other parts of the group.

While recovering strongly, the group’s sales and adjusted earnings remained below pre-pandemic levels.

JP Morgan said Volvo had produced a “solid set of results,” despite the disruptions.

“Despite limited visibility in the supply chain and semi-conductor shortages still impacting the industry in 2H21, we expect consensus expectations to move slightly higher,” the investment bank said in a note.

Volvo, which competes with Germany’s Daimler and Traton, said order intake of its trucks, including brands such as Mack and Renault, fell 4% from a year earlier.

It forecast European heavy truck market registrations would rise to 280,000 trucks in 2021, and to 300,000 trucks next year.

It expects the U.S. market to reach 270,000 trucks this year, and 300,000 trucks in 2022.

Volvo had previously forecast registrations in both Europe and the United States at 290,000 trucks this year.

Adjusted operating profit at the company, which also makes construction equipment, buses and engines, rose to 9.40 billion Swedish crowns ($1.09 billion) from 7.22 billion a year earlier, beating the 8.87 billion expected by analysts.

A global shortage of semiconductors has hit large swaths of the manufacturing sector, not least the vehicles industry, and has prevented Volvo from fully capitalising on robust demand.

Daimler Trucks said this month it would continue to sell fewer vehicles than it could have in the coming year as chip shortages hamper production.

($1 = 8.5917 Swedish crowns)

(Reporting by Helena Soderpalm Editing by Jason Neely and Mark Potter)